Business conditions in Kenya’s private sector deteriorated at the sharpest pace in a year in July, according to the latest Purchasing Managers’ Index (PMI®) by Stanbic Bank Kenya and S&P Global. The headline PMI dropped to 46.8 from 48.6 in June, marking the third consecutive month of contraction and signalling a solid downturn in overall economic activity.
The reading, which remains below the 50.0 neutral threshold that separates expansion from contraction, reflects declining output and new orders as businesses struggled with weakening consumer demand, elevated input costs and disruptions caused by political protests.
“The Stanbic Kenya PMI suggests that private sector output and new orders weakened for a third month in a row, reflecting the negative impact that recent protests have had on businesses,” said Christopher Legilisho, Economist at Standard Bank. “Harsh economic conditions have crimped consumer spending, particularly in services and manufacturing.”
While output fell across the board, the downturn was concentrated in the manufacturing and services sectors. In contrast, agriculture, construction, and wholesale and retail sectors reported marginal gains, though not enough to offset the overall contraction.
Price Pressures and Political Unrest Weigh on Activity
Firms cited surging input costs, driven in part by a sharp rise in fuel prices and higher tax obligations, as key factors behind reduced production and purchasing activity. The Energy and Petroleum Regulatory Authority (EPRA)’s upward adjustment of fuel prices in July contributed to the highest rate of input cost inflation in seven months. In response, businesses raised their selling prices at the fastest pace since January.
In addition to rising costs, political demonstrations during the month were reported to have discouraged customer footfall and lowered spending power. These factors led to the steepest drop in new business since July 2024.
With demand shrinking, firms reduced purchasing activity at the fastest rate in nearly three years, and stocks of purchases fell for the first time in 2025. However, employment levels remained broadly stable, enabling firms to clear backlogs at the quickest pace in over four years.
Cautious Optimism Ahead
Despite the current headwinds, Kenyan businesses remained cautiously optimistic about future activity. Confidence rose for the second month running to its highest level in 15 months, buoyed by planned product launches, land acquisitions, marketing initiatives and expansion through new branches.
“The private sector activity is mixed in the sense that certain sectors are doing well, while other sectors are struggling under the weight of weak consumer demand conditions,” Mr Legilisho noted.
